How I’m going to FIRE in 5 years

In my December ’19 update, I mentioned that we were aiming to FIRE in 5 years time in 2025.

I was asked in the comments about my FIRE number but due to my laziness I didn’t reply. I appreciate comments on the blog and need to make the effort to respond when I get them.

Anyway this post should answer any of those questions and show my plan and reasons to achieve FIRE in 5 years.

Recent events have made me determined to drastically scale down work when I reach 55 years old and I can access my SIPP Pension. I will not retire fully as I will continue to manage my rental properties which I enjoy doing.

A number of people who we know, in our age group or not much older, have recently either become ill or died suddenly. This has brought home the realisation that health is not guaranteed and we don’t want to be working longer than we have to.

Also, our parents are now in their 70’s, and we have been aware of how they have slowed down in recent years, with various health issues starting to appear.

My thinking now is that we need to make the most of the 15 year period between ages 55 and 70, a period when we are most likely to be mobile and healthy enough to enjoy it to the full. Anything after 70 is a bonus.

What FIRE number am I aiming to hit in 5 years?  I am looking to withdraw £50k a year before tax from my pot. Using a 4% withdrawal rate, this means I need £1.25 million!

My current net worth is £541k so how is it possible to get to that number?

Assuming a 7% rate of growth on my current net worth this would only give me around £800k net worth in 5 years.  Although I will be making further contributions to my investments,  for this exercise I will use the £800k figure.

There are two other items that I don’t currently include in my net worth. These are a small DB pension worth £4k a year and, of course, the elephant in the room, the State Pension, which for us as a couple will be worth £17.5k a year as we will have full NI contributions.

Should the State pension be included in your Net Worth?  This point was recently discussed by weenie at Quietly Saving, and GFF at Gentlemans Family Finances.

Weenie includes the State pension as part of her plans whereas GFF doesn’t. Partly due to being a similar age, I am firmly in weenie’s camp, and include the state pension in my plans.

The risk/reward of working a number of extra years, possibly into my sixties, just in case the state pension changes, is too much. If things do change I’ll cross that bridge when it comes.

One of the top regrets of people who have achieved FIRE is not pulling the trigger earlier when they could have done.

Using a 4% withdrawal rate, the £4k DB pension is equivalent to £100k net worth, and £17.5k State pension is equivalent to £437k net worth. These added together theoretically adds £537k to my net worth.

In total then my projected FIRE number at 55 is £800k + £537k = £1.37 million, which if I take £50k per year gives a withdrawal rate of 3.64%.

A 4% withdrawal gives £54,800. The tax on this would be around £6k at basic rate, so we would just be shy of £50k net income, ignoring other tax-saving measures.

Just got to make sure there is enough in my SIPP and rental income combined to withstand the higher withdrawals until the state pension kicks in. I will need about £500k in my SIPP to ensure it never runs out.

So that is my plan.

I’m going for it!


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